What is first-party cyber coverage?
First-party coverage protects a company against loss of productivity, profits, reputation, first-party data and the costs incurred in establishing a timeline surrounding a hack attack, computer virus or malicious employee. Traditional coverage policies such as property and crime policies do not cover first-party cyber losses.
What questions should retail brokers and agents ask clients to determine a need for first-party cyber coverage? Here are a few to pose:
- What data is important to running your business? What would the impact be if that was temporarily or permanently lost?
- How would your business be affected if your systems were down?
- To what extent would your company’s reputation suffer in the event of lost or compromised data or downed systems?
Most business people would agree their data are among their most important assets, worth in some cases many times the value of the physical equipment on which it is stored. Yet most business owners do not realize that a standard property policy would only respond in the event the data itself is physically damaged or destroyed.
A cyber coverage policy can provide comprehensive coverage for data restoration and rectification in the event of most cyber incidents. It also can provide coverage for loss of profits associated with a systems outage that is caused by a “non-physical” peril like a computer virus or denial of service attack. When systems are compromised, businesses run the risk of losing customer trust. Engaging a public relations firm to help mitigate the damage can be insured under a cyber insurance policy. Cyber liability policies also cover forensic costs.
What major changes have you seen in this market over the years?
The introduction of privacy breach laws in the early 2000s and the costs associated with complying with these laws prompted companies and their brokers to investigate transferring these costs to insurers. This change in the regulatory environment has led to a significant change in buying habits. People’s use of social media is another market-shaping trend. Employees are now able to publish information via networking sites at high speeds to large audiences that were previously unimaginable. Claims arising from leaked information, defamatory statements and copyright infringement can all be covered under a cyber liability policy.